A few months back we speculated, along with the rest of the private equity world, on the effect that a Mitt Romney presidential campaign would have on an industry that is already under siege from the 99% and the tax-hikers in Congress. Things were actually going pretty well, as the media pretty much ignored Romney’s PE history, and the few assaults lobbed by the other Republicans in the race have landed with a quiet thud. Although it has been fairly quiet on the GOP nomination front, the PE industry is girding up for an all-out assault on Romney’s PE background by the Obama campaign.
Source: http://politicalticker.blogs.cnn.com
And, with the kind of fundraising that Romney has planned these next few weeks, they will have plenty of ammo. He’ll be wining and dining with the Wall Street elite and many of his former PE buddies from JP Morgan, Kohlberg Kravis et al, and he is expected to leave town with a pot full of money. Never mind that Obama is still the largest recipient of Wall Street funds, when he is through, Romney and his PE cohorts will be the reason why there is 9% unemployment.
Romney’s attempts at turning around the nasty portrayals of the PE business have been mildly effective. He’s a master at turning the negatives into positives pointing out the massive number of jobs his companies have created as compared with the number that had to be eliminated to save companies or shareholder value. Thus far, Romney seems to have found the right balance in talking up his PE experience and downplaying it when the glare gets to bright. A recent New York Times profile illustrated that Romney is a frugally wealthy with none of the outward signs of a money-grubbing robber-baron, which may give a few coats of Teflon.
A recent article written by Steven Kaplan of Bloomberg News makes the case for Romney’s PE background as not only being relevant to the experience one needs in the White House, but as being extremely valuable. Romney campaign strategist ought to turn it into page one of their strategy book.
Kaplan points out that the, as a whole, PE firms have delivered for their constituents, something that many in politics have failed to do. And, pointing to Romney’s record at Bain, he shows that the firm, under his tenure, outperformed most other PE funds as well as the public markets.
Even in an industry with such strong performance, Bain Capital stood out. During Romney’s tenure, the firm raised five funds that all outperformed the typical PE fund. Four of the five were well into the top quartile of performance. To achieve that level of performance, PE firms have to employ three types of engineering – financial, governance, and operational – all three of which, according to Kaplan, are essential in the management of the federal government. Romney’s success at employing all three while adding a consulting element was so prevalent that it became to model for modern day PE firms, which have moved away from just being financial engineers, to becoming builders of companies.
Kaplan makes the correlation between Romney’s skills and strategies as a PE executive – cutting costs, promoting productive policies, and investment in expansion of productive activities – to that of what is needed from a President in today’s economic and fiscal environment. And, just as Romney did all of that for the benefit of his customers, the President must be willing to do the same for the sake of the public.
